Exam 5: Accounting for Inventories

The Curtis Company's inventory records reflects the following for the month of October 2016: Assuming that Curtis Company uses the FIFO cost flow method in a perpetual inventory system: (a)Calculate the cost of goods sold and the ending inventory for the month ending October 31,2016. (b)Prepare the journal entry for the sale of inventory on October 31,2016.

Zirkle Company understated its ending inventory.Which of the following answers correctly states the effect of the error in the present period?

On June 1,Delaware Co.had one unit in beginning inventory that cost $10.00.During June,Delaware paid cash to purchase two additional inventory items.Delaware purchased the first item for cash at a cost of $10.00,and the second at a cost of $12.00.Delaware Co.sold two inventory items for $24.00 each,receiving cash.Based on this information alone,indicate whether each of the following items is true or false. _____ a)The amount of ending inventory will be $10 assuming the LIFO cost flow was used. _____ b)Cost of goods sold would be $24 assuming the weighted average cost flow was used. _____ c)Cash flow from operating activities in June would be $28 assuming a FIFO cost flow was used. _____ d)Cash flow from operating activities in June would be $26 independent of what cost flow assumption was used. _____ e)The amount of gross margin would be $26 assuming the FIFO cost flow was used.

In a period of rising prices,use of the FIFO cost flow method would cause a company to pay more income taxes than would use of LIFO.

Use the following information for questions The inventory records for Radford Co.reflected the following -Determine the amount of gross margin assuming the weighted average cost flow method.

Indicate whether each of the following statements is true or false. _____ a)The FIFO cost flow method assumes that the company physically rotates inventory so that the oldest inventory is sold first. _____ b)In a period of rising prices,FIFO gives higher cost of goods sold than LIFO. _____ c)Under the weighted average cost flow method,the cost per unit of ending inventory is equal to the cost per unit of inventory sold. _____ d)In a period of declining prices,LIFO will result in higher income tax expense than FIFO. _____ e)In a period of rising prices,FIFO gives higher ending inventory than LIFO does.

How would the sale affect the financial statements if Stan's Surf Shack uses the FIFO inventory cost flow method?

Use the following information for questions Glasgow Enterprises started the period with 80 units in beginning inventory that cost $7.50 each.During the period,the company purchased inventory items as follows Glasgow sold 220 units after purchase 3 for $17.00 each. -Glasgow's ending inventory under LIFO would be:

List the specific steps used in computing the estimated inventory balance using the gross margin method.

An error that results in overstating ending inventory would have what effect on the company's financial statements in the current year?

Diaz Company's first year in operation was 2016.For 2016,its cost of goods sold using FIFO was $240,000,and its ending inventory was $58,400.If Diaz had used the LIFO cost flow method,its ending inventory would have been $56,000. Required: a)What would the cost of goods sold have been with LIFO? b)Based on this information,was 2016 a period of rising prices or falling prices?

How would the sale affect the financial statements if Stan's Surf Shack uses the LIFO inventory cost flow method?

Assume that Stan's Surf Shack made the second purchase for cash.How would that purchase affect the financial statements?

When prices are rising,which method of inventory,if any,will result in the lowest relative net cash outflow (including the effects of taxes,if any)?

During a period of rising prices,a company's cost of goods sold would be higher using the LIFO cost flow method than with FIFO.

Hoover Company purchased two identical inventory items.The item purchased first cost $33.00.The item purchased second cost $35.00.Then Hoover sold one of the inventory items for $62.00.Based on this information:

Curtis Company had the following transactions for the month of January: Assume that Curtis uses the perpetual inventory method and that all transactions were for cash. Required: a)Prepare journal entries for the above transactions using the FIFO cost flow method. b)Determine the amount of ending inventory using the FIFO cost flow method.

Explain the effects of an understatement of ending inventory on both the present year's net income and the following year's net income.What is the effect of this error on the inventory balance at the end of the following year?

What is meant by "market" in lower-of-cost-or-market calculations?

If a company applies the lower-of-cost-or-market rule on an aggregate basis,its write-down of inventory is likely to be greater than if it applies the rule to individual items of inventory.